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T HE E QUITY M ETHOD On 12/31/2011, Co. B reports $6,000 of net income and pays $1,500 in dividends. What journal entries will Co. A make? To answer this we need think about the Investment in Co. B account the way an accountant does. 8 Investments

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B UYING C O. B ’s S TOCK – A Consolidation Example FASB (and International Accounting Standards) says that if one company controls another company the controlling company needs to do something more than use the equity method. 19 Consolidated Financial Statements